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Unemployment rate expected to rise

Evan Schwarten

Australia's unemployment rate is expected to continue to grind higher, possibly peaking at around six per cent in 2013.

AAP's survey of 14 economists on Tuesday revealed a median forecast for the unemployment rate to have risen to 5.5 per cent in November.

Total employment is expected to fall by about 5000 in the month while the participation rate - the percentage of the working age population either employed or looking for work is expected to remain unchanged at 65.1 per cent.

The Australian Bureau of Statistics will release labour force statistics for November on Thursday.

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Australia's unemployment rate has moved higher over the past six months, rising from a low of 5.0 per cent in April to its current level of 5.4 per cent.

At the same time the size of the workforce has declined, with the participation rate dropping from 65.4 per cent in May to 65.1 per cent.

JP Morgan economist Tom Kennedy said state and federal government budget cuts and weaker consumer spending were hurting the labour market.

He expects total employment to increase by 15,000 in November, but believes the unemployment rate to rise due to an increase in the size of the workforce.

Mr Kennedy said the unemployment rate was likely to increase steadily in 2013, before peaking around six per cent.

"We do think unemployment will start to trickle higher over the coming months, it is really a function of softer growth and firms remaining quite apprehensive in terms of increasing their head count," he said.

But he said the jobs market was likely to improve later in 2013.

"A lot of the problem we have at the moment is the government reining in the purse strings and tightening spending and payback from very strong domestic consumption in early 2012," he said.

"Once that works through the economy we think things will start to accelerate again towards the end of 2013 and into 2014."

UBS Australia chief economist Scott Haslem expected the figures to show a loss of about 10,000 jobs and an increase in the unemployment rate.

Mr Haslem said job advertisements were continuing to decline while business surveys showed confidence among employers was weak.

He expected the unemployment rate to continue to rise in early 2013, with job creation unlikely to keep up with population growth.

"We'd expect the unemployment rate to drift up towards 5.6 or 5.7 by early next year, by that time we think things should stabilise and remain around that mark for several months," he said.